SemOpenAlex |

SemOpenAlex

Matches in SemOpenAlex for { <https://semopenalex.org/work/W2343849521> ?p ?o ?g. }

Showing items 1 to 71 of 71 with 100 items per page.

W2343849521 endingPage "76" @default.
W2343849521 startingPage "58" @default.
W2343849521 abstract "EXECUTIVE SUMMARY Several surveys have been administered over the last 40 plus years to learn about capital budgeting practices of healthcare organizations. In this report, we analyze and synthesize these surveys in a four-stage framework of the capital budgeting process: identification, development, selections, and post-audit. We examine three issues in particular: (1) efficiency of for-profit hospitals relative to not-for-profit hospitals, (2) capital budgeting practices of the healthcare industry vis-à-vis other industries, and (3) effects of healthcare mergers and acquisitions on capital budgeting decisions. We found indirect evidence that for-profit hospitals exhibited greater efficiency than not-for-profit hospitals in recent years. The acquisition of not-for-profits by for-profits is credited as the primary reason for growth of multihospital systems; these acquisitions may have contributed to the more efficient capital budgeting practices. One unique attribute of healthcare is the dominant role of physicians in almost all aspects of the capital budgeting process. In agreement with some researchers, we conclude that the disproportionate influence of physicians is likely to impede efficient decision making in capital budgeting, especially for nonprofit organizations. INTRODUCTION As early as the 1950s, surveys have examined capital budgeting practices of industries other than healthcare. Several researchers have analyzed and synthesized these surveys (e.g., Mukherjee, 1987; Mukherjee & Al Rahahleh, 2011). Practitioners have learned how to make more efficient capital budgeting decisions, while academia has learned to modify relevant theories on the basis of feedback from business leaders. Since the early 1970s, researchers have surveyed healthcare organizations to learn about their capital budgeting practices. The purpose of this report is to synthesize these surveys and draw conclusions about how these organizations make capital budgeting decisions. HEALTHCARE FIELD Issues Unique to Healthcare Unlike organizations in most industries in which shareholders are typically the owners, only a small minority of healthcare organizations in the United States are investor owned (IO); the overwhelming majority are owned by one of two types of not-for-profit (NFP) entities: private, including churches, and government organizations (GOs) (American Hospital Association [AHA], 2013). Figure 1 presents trends by ownership for U.S. community hospitals for 1976–2006 (AHA, 2009). In 2011, there were 1,025 IO for-profit community hospitals, 1,045 GO hospitals, and 2,903 private NFP hospitals. In 2012, the numbers of hospitals were 1,068, 1,037, and 2,894, respectively (AHA, 2013).FIGURE 1 Ownership Trends for U.S. Community Hospitals, 1976–2006For the period from 1976 to 2012, NFPs dominate, making up 59% of hospitals; GOs are a distant second, making up about 25% of hospitals; and the remaining 16% are for-profit organizations. The coexistence of NFPs and IO companies creates a challenge for healthcare organizations. First, for-profit businesses have a clear objective: increase the monetary value of the organization for owners. The interests of an NFP, however, are not linked to increasing its monetary value, but rather to fulfilling its overall service mission. Second, NFPs cannot raise equity by issuing stocks or other forms of equity; thus, they are limited to retained earnings from operations, income from investments, philanthropic contributions, government grants, and debt financing. IO organizations can finance investment opportunities by selling stock to the public, as well as through retained earnings and debt financing (Reiter, Wheeler, & Smith, 2008). Third, to protect their return on investments (in the form of dividends, capital gains, or both), shareholders of an IO organization demand a sound financial statement; this is in contrast to the owners of an NFP, who do not receive dividends or capital gains and, therefore, look to the organization to manage surpluses to remain liquid and solvent. Even when a hospital is investor owned, it does not operate in the same environment as that of a publicly held corporation in another industry. The latter can set its own competitive price and receives payments directly from consumers. For hospitals, however, “the majority of payments for services made to healthcare providers are not made by patients, but rather by some third-party payer” (Gapenski, 2006, p. 4). In addition, unlike their counterparts in other industries, an IO hospital has to compete with other IO hospitals, as well as with NFPs and GOs. The environmental differences are expected to affect the way in which an IO hospital makes financial decisions vis-à-vis a publicly held firm in a non-hospital industry. Another element separating healthcare from other industries is the dominant role of one group of stakeholders—the medical staff—in hospitals. Kamath and Elmer (1989) reported that 105 of 120 responding organizations stated that the medical staff was directly involved in capital budgeting decisions. Kamath and Oberst (1992) found that medical staff participated in the major capital investment decisions of 91 of 94 responding hospitals. Kamath and Elmer (1989) and Kamath and Oberst (1992) compared their participation in financial decisions to that of the production staff and sales staff in industrial companies. Many researchers (Berman & Weeks, 1982; Kamath & Elmer, 1989; Smith, Wheeler, & Wynne, 2006; Wacht, 1972) suggest that this phenomenon strips hospital managers of the authority that is intrinsic to comparable executive roles in other businesses. The extensive influence of one group of stakeholders might lead to suboptimal capital budgeting decisions. Finally, hospitals have undergone major structural changes over the last 3 to 4 decades. Watt, Renn, Hahn, Derzon, and Schramm (1986, p. 1) stated that “shifts in Medicare and Medicaid reimbursement policies, increasing private concern about healthcare costs, technological change, and the growth of organized delivery systems … have radically altered the environment facing hospitals.” Watt et al. (1986) concluded that two primary ways in which hospitals have responded to the above changes are vertical mergers (i.e., diversification in non-hospital healthcare areas such as medical instruments), and (2) horizontal mergers (i.e., multihospital systems). The AHA Guide (2015) provides evidence of the popularity of multihospital systems; in 2013, 3,144 of 5,686 (55.3%) registered community hospitals were members of multihospital systems. A major reason for the growth in multihospital systems is acquisitions of NFPs by IO organizations. From 1972 to 2012, IO organizations grew at a 0.95% compound annual rate, while GOs and NFPs declined consistently during the same period (Figure 1). Both measures—vertical or horizontal mergers—are likely to increase the sophistication of financial decisions pertaining to hospitals. Lynch and McCue (1990) attributed expansion of the multihospital system mainly to the acquisition of independent NFP hospitals by IO hospitals. Robinson (2000) also pointed to the greater potential efficiency on conversion of NFPs to IO hospitals as investors demand accountability when extending external financing to for-profit hospitals. Questions Regarding Capital Budgeting Process of Healthcare Organizations In view of the discussions presented here, we focus on three main questions pertaining to the capital budgeting practices of healthcare organizations: To what extent are capital budgeting practices of healthcare organizations different from those of other industries? Do significant differences in objectives, capital structure, and so forth between IO hospitals and NFPs affect the way in which the two groups make capital budgeting decisions? Have structural changes and adapted coping mechanisms made capital budgeting decisions at healthcare organizations more efficient? Consequently, have the differences, if any, narrowed between healthcare organizations and other industries? The surveys we examined did not specifically break down responses into NFPs and IO hospitals. Indeed, the study samples in the majority of surveys were almost entirely from NFPs; only a small percentage represented IO healthcare organizations, making it difficult for us to directly compare the capital budgeting practices of the two groups. However, we posit that the growth in multihospital systems (especially via acquisitions of NFPs by IO organizations) has likely increased the sophistication of capital budgeting practices of the acquired NFPs. METHODS Analytical Procedure Pinches (1982) described the capital budgeting process as a four-stage framework: identification, development, selection, and post-audit. Participants generate ideas in the identification stage. They then develop full-blown proposals for the ideas with greatest potential. In the selection stage, participants explore investment opportunities and select the ones that meet the required criteria. Implemented projects are monitored in the post-audit stage, and feedback is elicited to improve the budgeting process. To understand how an organization makes investment decisions, one needs to ask many questions pertaining to each stage. Borrowing from Mukherjee (1987) and Mukherjee and Al Rahahleh (2011), we propose a list of similar questions (available from the authors on request). We attempted to scrutinize the results of each survey to assess the extent to which it broached these questions. Sample We reviewed 11 surveys from 1972 to 2007 (Campbell, 1994; Cleverley & Felkner, 1982; Ho, Chan, & Tompkins, 2003; Kamath & Elmer, 1989; Kamath & Oberst, 1992; Kleinmuntz & Kleinmuntz, 1999; Kocher, 2007; Reiter, Smith, Wheeler, & Rivenson, 2000; Smith et al., 2006; Williams, 1974; Williams & Rakich, 1973). Table 1 shows the survey year, method, response rate, breakdown of usable responses by ownership, and sample size.TABLE 1: Surveys of Capital Budgeting Processes in U.S. HospitalsTABLE 1: ContinuedData We obtained data for this review from responses in the 11 surveys to the questions pertaining to each stage. Not all surveys asked all questions in each stage, and some surveys may not contain questions from all four stages. Table 2 shows the extent to which each of the surveys addressed the questions.TABLE 2: Four Phases of Capital Budgeting in U.S. HospitalsTABLE 2: ContinuedStudy Limitations Our main objective was to acquire information from published surveys to derive conclusions regarding whether ownership-based differences exist, and whether changes over time (positive or negative) have occurred with regard to capital budgeting practices of healthcare organizations. The surveys we reviewed have some of the same limitations as those of most survey-based research, including nonresponse bias, questions that might be construed as leading, ambiguous wording in the questionnaire, misinterpretation of questions by respondents, and so forth. For these reasons, our conclusions should be viewed with caution. Some specific study limitations are as follows: As Table 2 shows, the selection stage was the main focus of most surveys. Information in the other three stages is less complete and, therefore, must be viewed with caution. In administering surveys, the researchers did not set out to compare the practices of IO organizations and NFPs. In addition, IO businesses participated at a very low rate (often less than 5% of the study sample). Therefore, many of our conclusions are driven by inference (indirect) rather than evidence (direct). We draw conclusions about the capital budgeting practices on the basis of our interpretation of the results of surveys dating from the 1970s to 2007. Because these surveys differ in terms of authors, sample size and composition, questions asked, survey methods, and the survey year, any attempt to identify a trend is problematic. Because all of these surveys focused on hospitals, our conclusions apply to hospitals only. RESULTS Identification Stage The identification stage for healthcare organizations is likely to be a bottom-up process. Most surveys indicated that the medical staff plays a central role in capital budgeting, including the idea-generation stage (Campbell, 1994; Kamath & Elmer, 1989; Kamath & Oberst, 1992; Reiter & Song, 2013; Smith et al., 2006). Smith et al. (2006) reported that while board approval is required for the capital budget and for projects exceeding some amount (e.g., $100,000), the specific capital items largely arose from medical staff, department, or manager requests. They described this process as one in which “managers and physicians originate requests, which are then evaluated” (p. 120). Smith et al. (2006) found the identification stage to be a bottom-up process. Reiter and Song (2013) also suggested that in virtually all surveys of healthcare organizations, physicians play a key role in identifying capital projects. Development Stage We broke the findings with respect to the development stage into two subcategories: screening and cost-benefit analysis. Screening With regard to the extent to which proposals go through a formal evaluation, Kamath and Elmer (1989) found that 26.8% of respondents formally evaluate all their capital investment proposals, while 42% formally evaluate 50% or fewer. Kamath and Oberst (1992) reported that 30% of respondents formally evaluate all their proposals, while about 35% formally evaluate about 50% or fewer. Smith et al. (2006) interviewed chief financial officers (CFOs) of nonprofit hospitals and healthcare systems in Michigan to determine how the budget was apportioned between routine items (e.g., equipment replacement) and strategic investments (e.g., new products). They found that hospital and health system leaders wished to allocate two thirds to strategic investments and one third to routine items. However, actual allocations ended up being one half to two thirds for routine projects and one third for strategic investments. Smith et al. (2006) offered two reasons for the differences between proposed allocations and actual allocations. First, some respondents expressed difficulty distinguishing strategic from operational capital and were unable to provide rough estimates. Second, 14 of the 20 CFOs interviewed gave rough estimates in wide ranges (for example, the percentage of capital budgets allocated to operations varied from 40% to 90%, and the percentage allocated to strategic investments varied from 10% to 60%). Smith et al. (2006) also reported that (1) more than 50% of respondents established evaluation criteria before receiving requests, and these criteria were well-known to the managers submitting proposals and stable over time; (2) 71% of respondents classified proposals according to clinical service line or elements of the strategic plan; and (3) 86% of respondents ensured that proposals followed guidelines and standardized formats. When decisions are made, they are based on information presented in the proposals. Cleverley and Felkner (1982) reported that 87% (an increase from 63% in 1975) of the hospitals specifically search for alternatives to major investments. They also reported that 79% of hospitals (an increase from 32% in 1975) develop a long-range capital budget (i.e., the first step in the capital budgeting process). Cleverley and Felkner pointed out that this increase is due to regulations that require hospitals participating in Medicare to have a 3-year capital plan. Cost-Benefit Analysis The surveys seem to suggest that healthcare organizations appropriately define cost-benefit data in terms of cash flows. Nearly all of the surveys that addressed this issue pointed to the difficulties faced by healthcare organizations in estimating cash flows when evaluating the strength of a proposal. As recently as 2013, Reiter and Song (p. 18) stated that “future research must address the challenge of cash flow estimation by developing tools to track and methodologies to estimate the costs and benefits of health [information technology] for hospitals.” One reason for the difficulty is the presence of third-party payers. For example, Cleverley and Felkner (1982) argued that incorporating the effects of cost reimbursement from major third-party payers in the estimation of cash flows is critical because failure to adjust cash flows for cost reimbursement may lead to a poor decision regarding an investment's acceptability. These authors found that 64% of hospitals made adjustments for cost reimbursement in estimating cash flows in 1980, which was up from 31% in 1975. Similarly, Reiter et al. (2000) indicated that healthcare systems that receive capitation payments face added challenges in predicting project-specific cash flows. In synthesizing surveys from other industries, Mukherjee and Al Rahahleh (2011) reported that nonhealthcare organizations consider development as the most difficult, albeit the most crucial, stage in capital budgeting. The predominant reason for this observation is the complexity (for example, consideration of opportunity costs) involved in estimating cash flows. Healthcare organizations, however, do not consider the development stage to be the most crucial or the most difficult, which we will discuss later in this article. Selection Stage Personnel One of the most common findings in all of the healthcare surveys is the dominant role of the medical staff in all stages of the capital budgeting process. For example, Kamath and Oberst (1992) found that medical staffs participated in major capital investment decisions at their hospitals by providing subjective input into the budgeting process, providing objective patient data, and participating in the formal analysis stage. Similarly, Campbell (1994) reported that hospitals are highly influenced by physicians' requests in decisions to replace equipment. Specifically, she investigated the factors affecting decisions to replace hospital plant and equipment and found that factors affecting replacement decisions are largely dictated by physicians, accrediting agencies, and regulators. Smith et al. (2006) reported that the role of physicians is central to the development and approval of proposals in most healthcare systems. Reiter et al. (2000) concluded that about half of the systems in their sample accounted for physicians' preferences in the capital expenditure evaluations. Selection Techniques Table 3 summarizes survey findings regarding the popularity of a given selection technique. A quick look at Table 3 leads to the observation that the payback period has been the most popular tool for evaluating capital investments. However, on closer observation, one finds that net present value (NPV), internal rate of return (IRR), and profitability index (PI), when bundled together, have been more popular than the payback period since 1986. Kamath and Elmer (1989) found that 53.0% of healthcare organizations used the discounted cash flow (DCF) bundle compared with 26.5% of organizations that used the payback period. Similarly, Kamath and Oberst (1992) reported that 42.02% of organizations used the DCF bundle compared with 28.72% of organizations that used the payback period. Kocher (2007) used a Lickert scale (1= seldom, 5 = frequently) to rate the popularity of each selection tool; payback period, NPV, and IRR received scores of 3.72, 3.13, and 2.91, respectively. We believe that if NPV and IRR had been bundled together, these DCF tools would rank higher than the payback period tool. Table 3 also shows the declining popularity of the payback period and the simultaneous increase in popularity of the DCF tools. In this regard, healthcare organizations seem to be following in the footsteps of industrial organizations. Figure 2 shows the increasing popularity of DCF-based methods among hospitals and organizations in industries other than hospitals. According to several authors (Cleverley & Felkner, 1982; Kamath & Elmer, 1989; Kamath & Oberst, 1992; Kocher, 2007; Williams, 1974), the increasing size of healthcare organizations does not explain the greater use of sophisticated selection techniques (i.e., DCF tools). Some researchers attribute the greater use of sophisticated tools to the growth in multihospital systems. For example, Reiter et al. (2000, p. 37) conjectured that the “use of sophisticated techniques most likely reflects the fact that these are large systems and leaders in their field.” Kocher (2007) found a statistically significant positive relationship between hospitals that belong to a multihospital system and the use of DCF methods. She pointed to (1) the economies of scale that a multihospital system experiences when highly trained financial managers are hired to develop a system-wide process for evaluating investment alternatives; (2) the cost pressure multihospital systems face from fierce competition; and (3) the sophisticated approaches that are required to help managers deal with the complex multihospital system. Consistent with the increasing reliance on DCF methods, the percentage of organizations that use other methods (outside the traditionally available tools) or no method has declined over time. Table 3 shows that the percentage of users of other methods declined from about 34% in 1972 to 10% in 1989, while the percentage that uses no methods declined from 45% in 1975 to a little more than 7% in 1989.TABLE 3: Use of NPV, IRR, and Payback Period as Primary Method of Evaluating ProjectsFIGURE 2 Use of Discounted Cash Flow (DCF) and Payback Period as Primary Selection ToolsAn unusual feature of healthcare organizations is their heavy reliance on qualitative factors in their capital budgeting decisions. For example, Williams and Rakich (1973) found that 33.9% of respondents relied on factors such as need, availability of funds, and relevance to patient care when evaluating their capital investment decisions. Williams (1974) found that 37.3% of respondents based capital budgeting decisions on the availability of funds and on need. According to Kamath and Elmer (1989), 24.1% of respondents reported that the accept or reject decision was based on qualitative factors more than 75% of the time, and 29.3% of respondents reported that the final decision was based on qualitative factors 51% to 75% of the time. Kamath and Elmer (1989) and Kamath and Oberst (1992) found that facility need, physician demand, community needs, and enhanced marketability were the four most important qualitative factors. Kocher (2007) reported that the first three of these factors were common among survey respondents; employee safety was the fourth most common qualitative factor in capital budgeting decisions. Hurdle Rate Kamath and Oberst (1992) reported that 68% of responding healthcare organizations used weighted average cost of capital (WACC). They also pointed out that actual cost of capital varies depending on ownership. They found that the reported cost of capital was 8.19% for state, county, and city government-affiliated hospitals; 9.75% for community NFP hospitals; 10.36% for church-affiliated hospitals; and 12.5% for IO hospitals. Reiter et al. (2000) also found that healthcare systems used WACC in the capital budgeting process, although they noted less agreement on how to compute it. For example, one organization calculated WACC as the weighted average of the cost of equity (9%, which is related to the opportunity cost on invested funds) and the cost of debt (6%, based on the average interest rate on borrowed funds). Ho et al. (2003) reported that the most frequently cited discount rate used in DCF was 8% (range, 7% to 12%). They indicated that 70% of respondents do not adjust the discount rate for inflation, and 50% of respondents do not adjust cash flows for inflation. Block (2005) investigated whether differences exist in the capital budgeting practices of eight major industries (energy, technology, manufacturing, retail, finance, healthcare, utilities, and transportation), consisting of 302 Fortune 1000 companies. He reported that 75% of the healthcare respondents use the WACC as the primary cut-off criterion for projects, whereas 12.8%, 8.1%, and 3.7% use return on stockholders' equity, required growth in earning per share, and other metrics, respectively. He also pointed out that 56.2% of healthcare respondents used the divisional cost of capital, while 43.8% used corporate-wide measures. However, Block's findings should be interpreted with caution. First, healthcare organizations in their sample included pharmaceutical companies, medical product companies, and hospitals. Second, the sample was composed of Fortune 1000 companies, which are likely to be larger and more sophisticated than other companies. Handling Risk Do healthcare organizations consider risk in making capital budgeting decisions? If so, how do they incorporate risk into the decision-making process? Does the risk-adjustment process vary depending on the ownership of the hospitals? Cleverley and Felkner (1982) reported that 64% of hospitals accounted for risk in their analysis of capital investment proposals in 1980, up from 38% in 1975. Kamath and Elmer (1989) stated that 30% of respondents “explicitly” accounted for risk in their analysis of capital investment proposals. Kamath and Oberst (1992) indicated that 36% of respondents explicitly accounted for the relative risk of the project evaluated. Survey findings indicate that the two principal methods of adjusting for risk were the risk-adjusted discount rate and shortening the payback period. The popularity of shortening the payback period to adjust for risk is consistent with its popularity as a selection tool. However, this method of risk adjustment appears to be losing ground, which is consistent with our earlier observation of the declining popularity of payback as a selection tool. Kamath and Elmer (1989) and Kamath and Oberst (1992) found a declining trend in the use of shortening payback (i.e., shortening the maximum acceptable payback period) for adjusting risk. Kocher (2007) gave the highest mean rating to shortening payback. However, assuming that a project correlation matrix was used to adjust the discount rate (i.e., the lower the correlation, the lower the adjustment), we believe that the risk-adjusted discount rate is likely to attain a higher rating than that for shortening the payback period. Post-Audit Stage The surveys we reviewed devoted less attention to the post-audit stage than they did to the other stages. However, the percentage of healthcare organizations that perform post-audits appears to be significant. Kamath and Oberst (1992) reported that 43% of respondents performed post-audits of their major projects, and Ho et al. (2003) found that 85% of respondents conducted postexpenditure audits for long-term investment projects. Kamath and Oberst (1992) reported that the difference between actual and expected outcomes of capital projects was the most frequently evaluated area among respondents who conducted post-audits. About 98% of their respondents were from NFP (including government) hospitals; thus, it is difficult to determine whether post-audits were conducted more frequently in for-profit hospitals. An Overview We offer the following guarded conclusions regarding the four-stage capital budgeting process: The identification stage is a bottomup process in which physicians play a dominant role. In the development stage, the percentage of hospitals conducting formal evaluations of proposals has increased steadily. Physicians play a role in developing cash flow estimates (Smith et al., 2006). Third-party payments complicate the estimation of cash flows from major investment alternatives and increase the uncertainty in the decision-making process. However, unlike most industrial organizations, healthcare organizations typically do not consider estimation of cash flows to be the most critical stage of the capital budgeting process. We can only speculate on the reasons. First, the survey samples in the majority of studies consist primarily, if not exclusively, of NFP organizations. Final decisions about projects are mission driven, not stock-market driven; therefore, decision makers focus less on the accuracies of cash flows. Second, Smith et al. (2006) reported that physicians are central to the development and approval of proposals in most healthcare systems. Given the dominant role of physicians in every aspect of capital budgeting, their cash flow projections may not be scrutinized for accuracy. Third, NFP organizations may encounter difficulties in computing the costs of funds (i.e., WACC) required to apply DCF methods. In the project selection stage—the focus of most surveys—the evidence shows that the payback period is the single most popular tool for evaluating capital investment alternatives. However, when we combine NPV, IRR, and PI into one DCF technique, the survey results show that use of payback period as the primary tool is declining and use of the DCF techniques is increasing. Shortening the payback period continues to be a popular method for adjusting for risk. However, the surveys provide indirect evidence suggesting a declining popularity of shortening payback relative to use of the risk-adjusted discount rate. Regarding the post-audit stage, the survey findings suggest that a large proportion of healthcare organizations perform post-audits of the projects they have implemented. CONCLUSION In this report, we set out to answer three questions: (1) Do for-profit organizations, given the market's discipline, make more efficient capital budgeting decisions than their NFP counterparts? (2) Because the vast majority of hospitals in our study are nonprofit organizations whose primary objective is to fulfill their service mission, in contrast to for-profit businesses whose objective is to maximize the wealth of shareholders, do NFPs make less efficient decisions than for-profit organizations? (3) How have merger-induced structural changes and the consequent coping mechanisms affected the capital budgeting policies of healthcare organizations? The surveys in our review do not provide definitive answers to the first two questions because they were not designed to investigate these issues. However, the evidence, although indirect, supports the notion that the growth of multihospital systems has had a positive effect on the efficiency of capital budgeting decisions. An indication of this is the increasing popularity of DCF-based tools as the primary selection technique and the decreasing popularity of shortening the payback period as a way to adjust for risk. Several researchers (Lynch & McCue, 1990; Robinson, 2000; Watt et al., 1986) attribute the growth of the multihospital system to acquisitions of NFPs by IO hospitals. Thus, these results provide indirect support for the possibility that IO hospitals are more efficient in making capital budgeting decisions. Robinson (2000) suggested that conversions of NFPs to IO organizations may have led to greater efficiency in the system on the basis of the argument that providers of funds demand accountability when extending external financing to for-profit hospitals. The growth of multihospital systems appears to have narrowed the gap in capital budgeting practices between nonhealthcare industries and healthcare organizations. Use of the payback period as the primary selection tool has been declining (especially since 1986), whereas use of the DCF tools has been increasing in both types of organizations. Indeed, hospitals seem to be slightly ahead of other organizations in that they emphasize the theoretically superior NPV method over IRR, while organizations in other industries continue to prefer IRR. A notable difference between healthcare and industrial organizations is the dominant role that one group of stakeholders—physicians—plays in all aspects of the capital budgeting process. This practice might run counter to the interests of other stakeholders. Smith et al. (2006) concluded that the healthcare system faces pressure to approve capital investment projects preferred by physicians, even when these projects may not be favored by the healthcare system. Reiter and Song (2013) concluded that pressure from physicians often trumps that which might be best for the hospital. We believe that NFP hospitals are more susceptible to physicians' influence because they do not face the same accountability requirements (i.e., market disciplines) that for-profit hospitals face (Robinson, 2000). Reinhardt (2000) recommended that NFP hospitals should be held formally accountable for the social obligations they are trying to fulfill in return for their tax-exempt status. A pertinent question remaining is whether the dominant role played by physicians impedes NFPs' ability to meet their social obligations or make sound financial decisions. According to Smith et al. (2006), physicians who typically are not employees of the hospital and request capital without bearing the direct cost of the investment make the use of a DCF technique difficult. Reiter and Song (2013) expressed a similar sentiment." @default.
W2343849521 created "2016-06-24" @default.
W2343849521 creator A5003824657 @default.
W2343849521 creator A5017424262 @default.
W2343849521 creator A5024493484 @default.
W2343849521 date "2016-01-01" @default.
W2343849521 modified "2023-09-26" @default.
W2343849521 title "The Capital Budgeting Process of Healthcare Organizations: A Review of Surveys" @default.
W2343849521 cites W1968387359 @default.
W2343849521 cites W2024397331 @default.
W2343849521 cites W2027852132 @default.
W2343849521 cites W2047344990 @default.
W2343849521 cites W2061794513 @default.
W2343849521 cites W2137188670 @default.
W2343849521 cites W2169101303 @default.
W2343849521 cites W2419436178 @default.
W2343849521 doi "https://doi.org/10.1097/00115514-201601000-00011" @default.
W2343849521 hasPubMedId "https://pubmed.ncbi.nlm.nih.gov/26904780" @default.
W2343849521 hasPublicationYear "2016" @default.
W2343849521 type Work @default.
W2343849521 sameAs 2343849521 @default.
W2343849521 citedByCount "1" @default.
W2343849521 countsByYear W23438495212017 @default.
W2343849521 crossrefType "journal-article" @default.
W2343849521 hasAuthorship W2343849521A5003824657 @default.
W2343849521 hasAuthorship W2343849521A5017424262 @default.
W2343849521 hasAuthorship W2343849521A5024493484 @default.
W2343849521 hasConcept C10138342 @default.
W2343849521 hasConcept C111919701 @default.
W2343849521 hasConcept C121955636 @default.
W2343849521 hasConcept C144133560 @default.
W2343849521 hasConcept C160735492 @default.
W2343849521 hasConcept C162324750 @default.
W2343849521 hasConcept C21425071 @default.
W2343849521 hasConcept C41008148 @default.
W2343849521 hasConcept C50522688 @default.
W2343849521 hasConcept C57918260 @default.
W2343849521 hasConcept C98045186 @default.
W2343849521 hasConceptScore W2343849521C10138342 @default.
W2343849521 hasConceptScore W2343849521C111919701 @default.
W2343849521 hasConceptScore W2343849521C121955636 @default.
W2343849521 hasConceptScore W2343849521C144133560 @default.
W2343849521 hasConceptScore W2343849521C160735492 @default.
W2343849521 hasConceptScore W2343849521C162324750 @default.
W2343849521 hasConceptScore W2343849521C21425071 @default.
W2343849521 hasConceptScore W2343849521C41008148 @default.
W2343849521 hasConceptScore W2343849521C50522688 @default.
W2343849521 hasConceptScore W2343849521C57918260 @default.
W2343849521 hasConceptScore W2343849521C98045186 @default.
W2343849521 hasIssue "1" @default.
W2343849521 hasLocation W23438495211 @default.
W2343849521 hasLocation W23438495212 @default.
W2343849521 hasOpenAccess W2343849521 @default.
W2343849521 hasPrimaryLocation W23438495211 @default.
W2343849521 hasRelatedWork W1480452202 @default.
W2343849521 hasRelatedWork W1539921135 @default.
W2343849521 hasRelatedWork W164362287 @default.
W2343849521 hasRelatedWork W2159232701 @default.
W2343849521 hasRelatedWork W2348075735 @default.
W2343849521 hasRelatedWork W2397704374 @default.
W2343849521 hasRelatedWork W3033205368 @default.
W2343849521 hasRelatedWork W3122722293 @default.
W2343849521 hasRelatedWork W3135270396 @default.
W2343849521 hasRelatedWork W3185280790 @default.
W2343849521 hasVolume "61" @default.
W2343849521 isParatext "false" @default.
W2343849521 isRetracted "false" @default.
W2343849521 magId "2343849521" @default.
W2343849521 workType "article" @default.